Zcash Proposes Dynamic Fee Market to Tackle Rising Transaction Costs and Network Congestion
Shielded Labs has introduced a detailed blueprint for a dynamic fee market aimed at addressing rising transaction costs and network congestion in the Zcash blockchain. This proposal builds on and transitions away from the historically static fee model, which set transaction fees at 10,000 zatoshi, later reduced to 1,000 zatoshi, a model that worked during low demand but contributed to wallet congestion and spam-like “sandblasting.”
The new plan calculates fees based on the median fee per action observed over the prior 50 blocks. To simulate ongoing congestion, synthetic transactions are introduced, and fees are bucketed into powers of ten to reduce linkability and enhance privacy. Additionally, a temporary 10× priority lane will open during periods of high demand to help users prioritize their transactions. This approach aims to preserve Zcash’s strong privacy features while avoiding complex protocol forks, steering clear of Ethereum-style EIP-1559 fee changes.
The current ZIP-317 action-based accounting system addressed some abuse vectors but maintained predictable, low fees that do not scale with usage. The proposed dynamic fee market builds on this by introducing demand-based pricing, which could better reflect network conditions. However, edge cases remain; for example, shielding large numbers of tiny transactions could cost double-digit amounts of ZEC, highlighting intrinsic fee rigidity as token prices rise.
The proposal envisions a phased rollout beginning with off-chain monitoring, then wallet policy adjustments, followed by a straightforward consensus change incorporating expiry-height limits and power-of-ten fee rules. These measures aim to mitigate fork risk and maintain privacy. Other ideas under consideration include using mining difficulty as a heuristic for adjusting USD-denominated fees, tuning prices according to mempool pressure.
The announcement has sparked significant community discussion amid rising Zcash user activity, institutional interest, and a price surge. ZEC traded around $395 on Tuesday, up more than 12% in 24 hours as traders and investors digested the roadmap for fee reform.
